On November 5, 2020, the new Federal Law for the Protection of Industrial Property (FLPIP) entered into force in Mexico, repealing the Industrial Property Law that was effective in our country for more than 25 years.
One of the most relevant and controversial changes presented by this new law was, without a doubt, the new system for adjudicating damages to IPR holders derived from infringement.
The new FLPIP provides for the possibility of claiming payment of damages in two different ways:
- Directly before the Federal Courts.
- Before the Mexican Institute of Industrial Property (IMPI), but once an administrative decision declaring the infringement is issued by the IMPI itself.
At first this could sound great, but not everything has been sunshine and roses, because although this change brought several benefits, there have also been some important negative aspects.
The positive
- Compensation can be obtained faster.
Under the previous law, it was only possible to claim damages through the courts and once the infringement decision in the administrative instance was declared final, which occurred after a long administrative litigation (from three to four years in matters related to trademarks and from five to eight years in patent or design matters) and then, to that, add the four or five years that civil litigation used to take, in the best scenario.
“If the affected owners choose to claim damages on the administrative path, they risk that IMPI issues a very weak and easy to be challenged decision.”
Mauricio Galindo
Now it is not necessary to go through the administrative instance first to be able to claim payment of damages, since it is possible to go directly to the Federal Courts. In addition, in case of opting for the administrative route it is no longer a requisite that the decision issued by the IMPI is final to be able to claim damages.
- The affected holder has the power to opt for administrative or judicial channels, as appropriate.
As we mentioned, previously it was not possible to claim damages through administrative channels. However, this procedure can now be processed before IMPI and without the need for waiting for the other instances to be resolved.
Here comes the most interesting question and it is directly related to the negative aspects we point out below: Would it be better to claim damages before the Federal Courts or through IMPI?
The negative
- If the affected owners choose to claim damages on the administrative path, they risk that IMPI issues a very weak and easy to be challenged decision, since IMPI officials lack experience and in-depth knowledge in matters of damages.
Demonstrating, determining, and quantifying damages caused by an infringing conduct is not an easy task, because even if the infringement is declared, that does not necessarily imply the existence of damages. For example: if John Doe uses a registered trademark without the authorisation of its owner, it is clear that he has committed an infringement, right? However, did he really cause harm or damage to the owner of the trademark if they have never used it?
This is where things get interesting and some don’t believe IMPI has the knowledge and experience to resolve these types of issues. Previously, only civil judges had this power, since they have deep knowledge of civil law, which is considered the mother of damages.
- If holders choose to claim damages through the administrative route, they risk that the decision issued by the IMPI declaring the infringement is reverted in a further instance and, therefore, that the decision that ordered the payment of damages is null.
With this, litigation can last for several years, although not as many years as before the new law.
- On the other hand, if the affected owners choose to claim damages directly before the Federal Courts, they risk the ruling of the judge not duly assessing the conducts of the defendants, since judges in civil matters lack the experience and knowledge necessary to resolve on the merits of an industrial property dispute.
Although civil judges have the experience and aptitude to determine and quantify damages caused by a conduct, they do not have the experience and knowledge necessary to determine the existence of an IPR infringement in terms of trademarks, patents or trade secrets; therefore, it is necessary to file expert witness opinions and with them, extending the trials to last almost as long as before.
Other reasons for controversy
- It remains to be studied and decided by our highest courts whether an administrative authority such as IMPI should be able to determine, quantify and adjudicate damages.
“Undoubtedly, the new legislation has taken IMPI to a new level, and, with it, its job is expected to evolve in the same way.”
In this regard, the Federal Law to Prevent and Eliminate Discrimination serves as a precedent, which, since its last amendment in 2014, empowered the National Council to Prevent Discrimination (CONAPRED), as an administrative authority, to order the payment of damages, without it having been reversed by the courts to date.
- The new law gave too much power to IMPI by not only empowering it to order the payment of damages, but also by turning it into an autonomous fiscal body that may directly execute and collect the payment of the fines it imposes, which was previously done by the Tax Authority (SAT).
In addition, article 389 of the FLPIP establishes that the income from the fines imposed by the Institute shall be used to cover its operating expenses.
Undoubtedly, the new legislation has taken IMPI to a new level, and, with it, its job is expected to evolve in the same way.
Conclusions
After almost two years since the new IP law entered into force, we consider that choosing the route to claim damages depends on the intention of the affected party: if they want to stop the infringing conduct as soon as possible, it’s best to follow the administrative path; whereas, if they want compensation at all costs, we suggest going to court.
Personally, we welcome the changes made and consider them an important success. Now, affected rights holders are more likely to seek compensation, which they rarely did before as they would prefer to avoid ten years of litigation.
Mauricio Galindo is the manager of the IP Litigation department at Dumont. He can be contacted at: mgalindo@dumont.com.mx
Images, from top: Shutterstock / EmiliaUngur, SNEHIT PHOTO
